Nelson Whiting (Single) Purchased a Home in Denver, Colorado for $300,000

question 64

Essay

Nelson Whiting (single) purchased a home in Denver, Colorado for $300,000. He moved into the home on July 1 of year 1. He lived in the home as his primary residence until December 1, year 2 when he sold the home for $450,000. Nelson sold the home because he needed to move because he was changing jobs and his new job was located several hundred miles away. What amount of gain must Nelson recognize on the home sale in year 2?

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Definitions:

Economic Activity

Economic activity encompasses all actions that involve the production, distribution, and consumption of goods and services in an economy.

Depreciation

The value of capital stock used up to produce GDP or that becomes obsolete during the year

Worn-Out Capital

Assets that have reached the end of their useful life in production processes, often leading to decreased efficiency and increased maintenance costs.

National Income Accounting

A statistical approach that measures the overall economic activity and income of a country.